What Is the Fair Credit Billing Act (FCBA) & How Does It Protect You?

Have you ever been notified of suspicious charges by your credit card issuer? Seen charges you don’t recognize on your statement? Maybe you find that you’ve been overcharged, or even billed for an item you never got.

Situations like this are why you should familiarize yourself with the Fair Credit Billing ACt (FCBA).

Fair Credit Billing Act Definition

The Fair Credit Billing Act is a federal law which was enacted in 1974 as an amendment to Regulation Z of the Truth in Lending Act (TILA). The law was designed to protect consumers from unfair credit billing practices.

The law applies to “open end credit accounts.” Think revolving charge accounts like credit cards. FCBA protection does not extend to installment loans. That refers to things like mortgages, auto loans, anything you are repaying on a predetermined schedule.

What Is the Purpose of the Fair Credit Billing Act?

The FCBA grants you the following rights related to credit card accounts.

  • You must receive your credit card bill from your issuer at least 14 days before the minimum payment due date. (The CARD Act of 2009 now requires card issuers to ensure that your billing statements are delivered at least 21 days before payment is due.)
  • If you have overpaid, your credit card company must either give your account a credit, or give you a timely refund. If the overpayment credit stays on your account for more than six months, they need to make a “good faith” effort to get you a refund.
  • You have the right to dispute credit card charges which you believe to be billing errors, including unauthorized charges.
  • Your liability for unauthorized charges is capped at $50, if you report the fraud promptly. (Most credit card issuers will waive even this charge as a matter of customer service.)
  • If you feel like the goods or services you paid for don’t live up to the standard that was promised, you may be able to dispute credit card charges. (These disputes are handled differently because they aren’t considered billing errors.)
  • Your creditor must resolve your dispute promptly (within two billing cycles, but not more than 90 days after receiving your dispute letter).
  • Under the Fair Credit Billing Act, as long as an account is being disputed, you don’t have to pay the charges that are being investigated.
  • Your creditor cannot take legal action against you during an investigation of a dispute. They are also prohibited from threatening your credit crating, reporting you as delinquent, or tampering with your account.

Like many consumer protection laws, the FCBA requires you to be proactive when it comes to credit card fraud. The FCBA offers you certain protections. It doesn’t give them to you automatically.

How to Dispute a Charge

If you want to take advantage of the protections you’re afforded under the FCBA, here are the steps which the Federal Trade Commission recommends you take.

  • Contact your credit card issuer as soon as you discover a purchase you didn’t make, and report the problem.
  • Write a follow up letter to your creditor to confirm that you reported the problem.
    • Keep a copy of your dispute letter.
    • Make sure that your letter reaches the creditor within 60 days of receiving the first bill with an error or fraudulent activity.
    • Send your letter via certified mail and ask for a return receipt so you’ll have proof of when the creditor received your dispute.
    • It’s important to send your letter to the “billing inquiry” address, not the address used for sending regular payments.
    • Be sure that your dispute letter includes all of the following information:
      • Your name, current address, and account number
      • A description of the billing error or suspected fraudulent activity

The Results

Once your card issuer has completed the investigation of your dispute, it must notify you in writing of the results.

If the bill was a mistake or fraud, your account must be credited back for the charge. Any related finance charges, late fees, or other fees must be reversed as well.

At this point you should check your credit reports for signs of fraud. The Fair Credit Reporting Act gives you the right to dispute any incorrect information about credit accounts, which could be lowering your credit scores.

On the other hand, if your card issuer determines that you do owe the bill, it must send you an explanation in writing. If you still disagree you can write the card issuer back, but you must do so within 10 days after receiving the explanation letter.

However, at this point it might be better to just go ahead and pay the bill if you can afford to do so. If you refuse to pay the disputed amount (even if you send your card issuer a follow up letter explaining why), the following unpleasant actions may occur.

  • Your card issuer may begin collection procedures.
  • Your card issuer may report late payments to the credit bureaus (with a statement that you don’t believe you owe the money).
  • Any late payments reported to the credit bureaus could damage your credit scores.

Lost or Stolen Credit Cards

If your credit card is lost or stolen, the FCBA still offers you protection. As long as you report the loss of the card before any fraudulent charges, the law says you are not liable for unauthorized charges.

What About Debit Cards?

If an unauthorized transaction occurs on your debit card, the FCBA does not protect you. Instead, the Electronic Funds Transfer Act (EFTA) offers you protections for fraudulent debit transactions.

EFTA protections for debit cards, however, are not quite as robust as the credit card fraud protections you may enjoy under the FCBA. So using credit cards over debit cards can be a useful way to protect yourself against fraud.

Keeping Your Account Safe From Fraud

Although you’re offered protection from unauthorized charges under the FCBA, it’s still in your best interest to do everything you can to keep your account information safe. Here are a few best practices you should follow.

  • Cut up old credit cards (cutting through the card number) before you throw them away.
  • Shred monthly statements before you throw them away or consider signing up for paperless statements.
  • Don’t give out your card information over the phone, unless you initiate the call yourself.
  • Only carry the credit cards you need. Store the rest in a secure location.
  • Report lost/stolen cards or suspicious activity to your card issuer immediately.
  • Monitor your credit reports periodically for suspicious activity.
  • If you’ve been a victim of identity theft or are worried about fraud, consider placing fraud alerts or credit freezes on your credit reports.

It’s your responsibility to promptly report credit card theft, loss, fraud, and billing errors when they occur. As a rule of thumb, you should develop the habit of reviewing your credit card statements carefully each month. When you review your statements, be on the lookout for double billing, incorrect charge amounts, unauthorized transactions, and any other suspicious activity.

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